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Enron Mail |
I am sending you several updates from our firm.
You can access the documents by clicking on the links provided. If you have difficulty accessing these documents, please contact me and I can send you a hard copy. In addition, feel free to forward these materials to others within your organization or others at different companies or organizations. If you do not wish to receive these notices, contact me by a reply to this email and I will delete you from my circulation list. The first update that I am sending is a publication regarding the E-Sign Act which took effect on October 1, 2000 and which allows electronic signatures to be legally binding. Many employers have utilized this statute to move toward a "paperless" workplace and place all personnel documents on-line. This article addresses the requirements of the act and gives helpful insights into steps to take to move to a paperless workplace. Please click on the following link to access this article. http://www.littler.com/publications/art_paperless_office.html <http://www.littler.com/publications/art_paperless_office.html< The second update is an ASAP from our firm prompted by the recent death of Korey Stringer, an offensive lineman for the Minnesota Vikings. This ASAP underscores the need for employers to be aware of (and have procedures in place to deal with) the dangers of heat stress for their employees. http://www.littler.com/nwsltr/asap_heatstress.html <http://www.littler.com/nwsltr/asap_heatstress.html< Also, here is a notice regarding our upcoming Texas Employer conferences. This year we are adding a half day conference in Austin to our regular conferences in Houston and Dallas. Finally, I also wanted to alert you to recent developments at the IRS. The IRS has basically been out of the independent contractor examination business for over five years. THE END IS NEAR. As the IRS has been completing its reorganization, the Commissioner has moved such "1099" examinations up to the being the IRS's number 2 priority. Currently there are some 7000 IRS Revenue Agents (auditors) undergoing training in Dallas on independent contractor audit techniques. The IRS has been authorized to hire another 4000 new Revenue Agents, who should be turned loose over the next 6 months. Earlier this year the IRS announced a more aggressive pursuit of criminal prosecutions against "employers" who have failed to timely remit payroll taxes as well as potential civil and criminal prosecution of taxpayers who have claimed to be exempt from payroll taxes. See my earlier emails on those issues. What triggers status audits? Sources of audits most typically come from a computer check of 1099misc which show a high ratio of 1099 to W-2 forms issued. State audits are most often triggered by referral from IRS regarding 1099misc or an unemployment claim filed by a former contractor. Tips provided by disgruntled former contractors are often a source of state audits. Adverse IRS SS-8 rulings may now become another source of audit leads. Both the states and IRS often target certain industries. For awhile in Southern California the intermodal trucking industry was in the IRS's radar. All agencies love the "new economy" as the high tech industry is now infamous for acting without considering the fine points. The California EDD has been touring Silicon Valley in recent years and inflicting major wounds almost everywhere it has landed. What should you be doing? Well, this is a good time for a self-audit. If there is a problem, minimally you should consider at least changing business practices going forward, if not taking corrective action. Boilerplate independent contractor agreements should be reviewed, not only to reflect state and federal standards (which haven't really changed it is simply that the sleeping dragon is awakening) but to make sure that the contractual provisions reflect the reality of the working relationship and that such relationship is truly an independent contractor arrangement. A well drafted independent contractor agreement is simply good prose unless the operational relationship reflects it. A poorly drafted agreement or one inconsistent with reality will be deadly. What is at stake here? When there has been a "misclassification" as to workers' status, both the state and IRS can come in and collect all the payroll taxes that should have been taken out to begin with. The normal audit window is three years or 12 quarters (in CA). At the state level that may include income taxes and special employee-paid taxes (like SDI) as well as employer-paid taxes like unemployment. At the federal level there is income taxes as well as social security and Medicare (uncapped) taxes (both the employee and employer's share) and employer-paid FUTA. As a general rule it doesn't matter that the worker paid income and other taxes as a self-employed person. The government may double dip. While there are procedures for abating the income tax portion of an assessment, the employer has to get an affidavit from the subject workers, who are seldom motivated to be cooperate. A worst case scenario could regulate in combined state and federal payroll tax liabilities 30 to 40% of compensation paid and that isn't inclusive of potential penalties and interest. What can we do to Help You? We can, with respect to employment status audits, do a number of things. 1. Proactively, we work with clients (and their accountants) to conduct a self-audit of their use of such workers; identify areas that need to be altered; revise standard agreements; help create checklists for evaluating the appropriateness of engaging in an independent contractor relationship. 2. If you receive an audit notice (state or federal), we can represent (upfront or behind the scenes) you in preparing for and/or during an audit and we can handle administrative appeals, Tax Court and District Court appeals too. 3. For companies with criminal tax issues or deficiencies regarding the remittance of employment taxes, the IRS (and the state) can go after the employees responsible on a personal level, as a "responsible person/party?" An employee may be personally accountable for a 100% penalty equal to the taxes and interest that the employer failed to remit. We have access to a number of highly qualified tax attorneys that are available to work with clients on criminal and responsible party controversies. Littler Mendelson is the nation's largest law firm representing management in employment and labor matters. With approximately 400 lawyers in 31 offices in the country, we have more lawyers practicing in this field than anyone else. Please let me know if you have questions about the issues addressed in this email or any other employment or labor issue. Kerry E Notestine Littler Mendelson, PC 1900 Chevron Tower 1301 McKinney Street Houston, Texas 77010 713.652.4748 713.951.9212 (fax) knotestine@littler.com www.littler.com ---- This email may contain confidential and privileged material for the sole use of the intended recipient(s). Any review, use, distribution or disclosure by others is strictly prohibited. If you are not the intended recipient (or authorized to receive for the recipient), please contact the sender by reply email and delete all copies of this message. To reply to our email administrator directly, send an email to postmaster@littler.com Littler Mendelson, P.C. http://www.littler.com - TXsavedate.gif
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